Index Correlation Matrix

Which assets actually diversify a stock portfolio? Monthly correlations across stocks, bonds, gold, REITs and Bitcoin.

	SPY	QQQ	SOXX	SCHD	ACWI	EFA	EEM	VNQ	GLD	SHY	AGG	TLT	BTC-USD
S&P 500SPY	1.00	0.91	0.75	0.83	0.97	0.83	0.69	0.78	0.14	0.10	0.40	0.19	0.35
Nasdaq 100QQQ	0.91	1.00	0.84	0.60	0.88	0.70	0.65	0.61	0.12	0.16	0.43	0.27	0.34
SOX (Semiconductors)SOXX	0.75	0.84	1.00	0.52	0.76	0.63	0.69	0.48	0.04	0.14	0.38	0.23	0.18
US dividend stocks (SCHD)SCHD	0.83	0.60	0.52	1.00	0.84	0.80	0.60	0.76	0.18	0.07	0.32	0.10	0.23
MSCI ACWIACWI	0.97	0.88	0.76	0.84	1.00	0.92	0.81	0.79	0.22	0.16	0.46	0.23	0.33
Developed ex-US stocksEFA	0.83	0.70	0.63	0.80	0.92	1.00	0.81	0.76	0.31	0.25	0.51	0.25	0.27
Emerging market stocksEEM	0.69	0.65	0.69	0.60	0.81	0.81	1.00	0.57	0.38	0.21	0.45	0.25	0.15
US REITsVNQ	0.78	0.61	0.48	0.76	0.79	0.76	0.57	1.00	0.21	0.24	0.57	0.41	0.25
GoldGLD	0.14	0.12	0.04	0.18	0.22	0.31	0.38	0.21	1.00	0.41	0.42	0.38	0.09
US 1–3 year TreasuriesSHY	0.10	0.16	0.14	0.07	0.16	0.25	0.21	0.24	0.41	1.00	0.81	0.69	0.02
US aggregate bondsAGG	0.40	0.43	0.38	0.32	0.46	0.51	0.45	0.57	0.42	0.81	1.00	0.90	0.14
US long-term TreasuriesTLT	0.19	0.27	0.23	0.10	0.23	0.25	0.25	0.41	0.38	0.69	0.90	1.00	0.08
BitcoinBTC-USD	0.35	0.34	0.18	0.23	0.33	0.27	0.15	0.25	0.09	0.02	0.14	0.08	1.00

Using the correlation matrix for diversification

What correlation measures

Each cell is the Pearson correlation of two assets' monthly total returns: how consistently they move in the same direction in the same month. 1 means they move in lockstep, 0 means no linear relationship and −1 means they move in opposite directions. Correlation says nothing about the size of returns: two assets can be highly correlated while one earns far more than the other.

Why low correlation helps

Combining assets that do not move together lowers a portfolio's volatility without necessarily lowering its expected return, because one asset's bad months are partly offset by another's. Broad stock indices such as the S&P 500, Nasdaq 100 and MSCI ACWI are highly correlated with each other (the US makes up around 60% of ACWI), so holding several of them adds little diversification. Bonds and gold have usually moved much more independently of stocks.

Correlations change over time

Correlation is not a fixed property. In crises, stocks tend to fall together just when diversification is needed most. Stocks and US Treasuries were negatively correlated for much of 2000–2020, but both fell together in 2022 as interest rates rose. Switch between periods to see how stable a relationship has been. Pairs that share fewer than 24 months of data are left blank, which mostly affects Bitcoin and the shorter ETF histories.